BDO in Uruguay – Cr. Mario Zugarramurdi – Business Consulting Partner – [email protected]
Sustainability is a word that, happily, is used more and more in the spheres of government, companies and especially among the people who make up our society: it is in the interest of EVERYONE.
There are, and there will be, various interpretations of the content of sustainability with an emphasis on different components: the environment, climate change, and social equity, among others. The United Nations has identified 17 concrete goals to make significant progress before 2030 (see https://www.un.org/sustainabledevelopment/sustainable-development-goals/).
In the business world, we have seen the evolution of concepts such as Corporate Social Responsibility towards “Environment, Social, Governance – (ESG)”.
ESG refers to policies and practices that a company adopts and that, based on certain metrics, can be measured in a continuous process, identifying its evolution. For example:
It is the ethical responsibility of companies to contribute in the field of ESG and for this reason it is important to measure their contribution and communicate it to the society where it is inserted: the interested parties will appreciate the information.
Various international organizations have long traveled the path of determining standards to measure and record sustainability, which are acceptable to the parties.
The IFRS Foundation is the entity that, in the field of professional Accountants and Auditors, determines, through the IASB, the most internationally accepted standards for preparing financial (accounting) information, IFRS, also adopted in Uruguay as accounting standards, IFRS.
The IFRS Foundation has constituted in November 2021 a new body of professionals specialized in sustainability issues, from the merger with other issuers of standards, the International Sustainability Standards Board – ISSB, whose mission will be to issue the standards to identify and expose the records and metrics related to Sustainability in companies, the IFRS Sustainability Disclosure Standards – IFRS SDS.
On March 31, the ISSB released the draft of the first two future standards for review:
It establishes the general requirements for disclosing financial information related to all the significant risks and opportunities in terms of sustainability of a company, to be communicated to the market through a set of disclosures.
In the document, it is proposed that the information related to Sustainability to be disclosed by companies should focus on four main topics: Governance – Strategy – Risk management – Objectives and metrics.
The topics mentioned are aligned with those identified by the Task Force on Climate-Related Financial Disclosures (TCFD), an entity created and active within the United Nations.
The IFRS S1 draft proposes the disclosure of all risks and opportunities related to Sustainability to which the reporting entity is exposed. The proposal directs companies to sources that can help identify risks and opportunities and to develop disclosures that allow investors or interested parties to estimate the value of the company.
The proposal does not determine the form or where the company must publish the reports related to Sustainability, but suggests that they be part of the annual financial information that is presented to the interested parties or to the public, if applicable.
• Exposure Draft IFRS S2 Climate-related Disclosures
It establishes the specific requirements for the identification, measurement and disclosure of the financial information of a company, related to the impact of its activity on the climate.
Comments from interested parties on the drafts are expected until July 29 and from then on, the ISSB will issue the first IFRS SDS to disseminate and promote its application in the business environment.
Companies that aspire to remain leaders in their markets must assume new commitments to present to their clients, staff, investors and their social environment, their contribution in terms of Sustainability and must annually demonstrate the results achieved under a pre-established format (standard) (IFRS SDS). Otherwise, they will most likely be relegated and their value will not be the same in the market.
